Halifax Reports Annual House Price Inflation of 9.6%

The Halifax has published its November House Price update. Key finidings are:

· House prices rose by 1.7% in November. There are some signs, however, of a likely cooling in housing market activity over the next few months. The market continues to be supported by strong fundamentals underpinned by a UK economy that has now recorded 57 successive quarters of growth.

· Employment – a key factor determining housing demand – continues to rise. The number in employment increased by 56,000 in the three months to September compared with the previous quarter. A lack of supply also maintains the upward pressure on house prices.

· The latest RICS survey reported a fall in surveyors' confidence in the outlook for house sales for the third successive month and buyer enquiries are below the levels seen between May and August. The House Builders' Federation reported an annual fall in the numbers looking at new homes for the third successive month in October.

· 'Real' average earnings growth has slowed markedly over the past six months. According to the latest ONS figures, annual average earnings growth in September (at 3.9%) was only 0.3% higher than retail price inflation (headline measure of 3.6%). Six months ago, there was a difference of 1.7%. This slowdown in real earnings growth, higher interest rates and a squeeze on households' discretionary income due to higher utility bills, should temper housing demand. In turn, house price inflation should ease over the coming months.

Commenting, Martin Ellis, Chief Economist, said:

"House prices increased by 1.7% in November. The marked slowing in real average earnings growth over the past six months, and a squeeze on households' discretionary income due to the substantial increase in utility bills during the last year, should temper housing demand. As a result, we expect house price inflation to ease over the coming months."

Interest rates beging to temper buy-to-let market according to latest RICS survey

Instructions to let property rose at the slowest pace since Q2 2005, says the latest RICS Lettings Survey for Great Britain.

The slowdown was skewed primarily towards flats as buy-to-let investors expressing caution in the market, reflecting a fall in landlords’ profit margins as a result of rising interest rates.

6% more Chartered Surveyors reported a rise than a fall in instructions to let property, compared to 13% in the previous quarter.

The slowdown points to a deterioration in landlords’ margins triggered by recent interest rate rises and a renewed fall in gross yields.

Only 9% more chartered surveyors reported a rise than a fall in instructions to let flats, compared to 19% in the last quarter.

Enlarge image Tenant demand for rental property remained solid this quarter, although the pace has eased back compared to the previous three months.


Continuing demand from tenants reflects a combination of factors, including a strong economy and rising migration.

Chartered Surveyors report that migration from Eastern Europe has impacted upon the demand side of the market as demand exceeded supply for a tenth consecutive quarter, putting upward pressure on rents.

The slight reduction in tenant demand – especially for flats – is evidence that some would-be first time buyers have been able to purchase a property.

Surveyors expect rental levels to rise further, though confidence has edged back slightly after reaching record levels.

Gross yields declined for the first time in two years, as house prices rose faster than rents, squeezing income investors. Gross yields were 4.6 % in October compared to 4.8 % a year ago.

RICS spokesperson Jeremy Leaf commented:

"The recent interest rate increases have painted the buy-to-let market as a less than favourable investment.

"With profit margins potentially reduced, affordability conditions could bite hard into investors' pockets and push up rents if interest rates rise further in 2007.

"But investors continue to express a high level of confidence in the longer-term buy-to-let market as selling activity remains low.

"With interest rates still relatively low and the economy gaining steam, first-time buyers are again placing a tentative toe in the property market."